Introduction

The KiwiSaver Act 2006 (“Act”) received the royal assent on 6 September 2006.
Different parts of the Act come into force at different times. Every employer in New Zealand is affected by the Act. It is the platform upon which superannuation and retirement savings will be built for generations to come.

KiwiSaver will also change the saving patterns of New Zealanders.
The industry is in the throws of preparing themselves for when the automatic enrolment provisions come into force on 1 July 2007. This involves:

KiwiSaver schemes being registered with the Government Actuary under the Act.

trustees of existing superannuation schemes submitting proposals to the Government Actuary to convert their superannuation scheme to a KiwiSaver scheme.

trustees of superannuation schemes submitting proposals to the Government Actuary to establish a KiwiSaver scheme under an umbrella trust that will also govern the existing superannuation scheme.

trustees of superannuation schemes applying for their schemes to be complying funds.

employers applying to the Government Actuary to be exempt employers.

employers trying to understand the impact of compulsory employer contributions.

As a new piece of legislation, there were some important omissions and interpretation issues. The Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 and the Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill were introduced immediately following the 2007 budget to implement the budget announcements. They address many of these omissions and interpretation issues. They also make substantial changes to KiwiSaver such as the introduction of compulsory employer contributions.

The Act was passed into law as a matter of urgency. The Bill has now been passed to the Select Committee and submissions from the public will shortly be called for. There is therefore no certainty that all the changes to KiwiSaver announced in the 2007 Budget as contained in the Bill will pass into law unchanged. Parliament’s website indicates the Select Committee’s (Finance and Expenditure Committee) report is due 16 November 2007.

It is also anticipated that further regulations will be passed before 1 July. The industry has been eagerly awaiting regulations dealing with such things as:

fee subsidy.

mortgage diversion.

Information on the fee subsidy was released in the Budget. The fee subsidy will be $40 per member per annum.

Rules governing withdrawals for first home purchases and the associated government subsidy are also pending.

The government’s intentions have been disclosed by a Treasury questions and answers paper which came out after the Budget.

At this time therefore it is impossible to provide a definitive paper on KiwiSaver. What we have done is the best that we can do at this time.

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